A breakdown of what’s in the tax bill approved by the House

WASHINGTON -- House Republicans on Thursday passed a bill along strict party lines that would revamp the U.S. tax code and affect every corner of the U.S. economy.

Passage of the bill comes just two weeks after it was first unveiled by House Ways and Means Chairman Kevin Brady.

It also comes the same week that the Senate Finance Committee is wrapping up work on its own tax overhaul bill at breakneck speed. Eventually any legislation approved by each chamber will have to be reconciled into one plan.

The House bill would mean tax cuts on average for all income groups in 2018 and most income groups in 2027, but the biggest benefits go to those at the top, according to the Tax Policy Center.

But that doesn't mean everyone in every income group would pay less. The TPC estimates that next year about 10% of middle income filers and 20% of the highest income households would pay more. Those percentages rise to 30% for each group by 2027.

Here are some key provisions in the bill.

FOR INDIVIDUALS

Reduces income tax brackets: There are seven federal income tax brackets in today's code that are taxed at 10%, 15%, 25%, 28%, 33%, 35% and 39.6%.

The House bill consolidates those into four brackets:

12% (up to first $45,000 of taxable income for individuals; $90,000 for married couples filing jointly)

25% (over $45,000 to $200,000 for individuals; over $90,000 to $260,000 for married couples)

35% (over $200,000 to $500,000 for individuals; over $260,000 to $1 million for married couples)

39.6% (over $500,000 for individuals; over $1 million for married couples)

There is also a 6% surtax or "bubble rate" that applies to adjusted gross income over $1 million ($1.2 million for couples) until it effectively claws back the benefits of the 12% bracket for the highest income households.

Doubles the standard deduction: The bill raises today's standard deduction for singles to $12,200 from $6,350 currently; and it raises it for married couples filing jointly to $24,400 from $12,700.

That would drastically reduce the number of people who opt to itemize their deductions, since the only reason to do so is if your individual deductions combined exceed the standard deduction amount.

Eliminates personal exemptions: Today you're allowed to claim a $4,050 personal exemption for yourself, your spouse and each of your dependents. The House bill eliminates that option.

For families with three or more kids, that could mute, if not negate any tax relief they might enjoy as a result of other provisions in the bill.

Expands child tax credit: The bill would increase for five years the child tax credit to $1,600, up from $1,000, for any child under 17.

But that $600 increase won't be available to the lowest-income families if they don't end up owing federal income taxes. That's because unlike the first $1,000, the extra $600 won't be refundable. Refundable means that if your federal income tax bill is zero, you get a check from the government because of the credit.

The bill would let more people claim the child tax credit. The income level where the credit starts to phase out would increase to $115,000 for single parents, up from $75,000 today, and to $230,000 for married parents, up from $110,000.

Creates a new $300 family tax credit: Taxpayers may claim a $300 non-refundable tax credit for themselves as well as any nonchild dependent -- for instance, a son or daughter over 17 whom you're supporting, an ailing elderly mother or an adult child with a disability.

So a family of four -- two parents, a 12-year-old daughter and an 18-year-old son -- could reduce their tax bill by up to $2,500, said Elaine Maag, a senior research associate at the Urban Institute. They could claim the $1,600 child tax credit for the daughter, the $300 nonchild dependent credit for the son and a $300 credit for each parent.

The income thresholds governing the family tax credit are the same as for the child tax credit.

The family credit would expire after five years.

Kills state and local income tax deduction, limits property tax break: The prospect of fully repealing the state and local tax deduction, which lets filers deduct their property taxes as well as their state and local income or sales taxes, has been met with strong opposition from lawmakers in high-tax states and cities.

So the House bill preserves an itemized property tax deduction for property taxes but only up to $10,000.

Limits deductible mortgage interest: The bill preserves the mortgage deduction as is for existing mortgages. But for newly purchased homes, you would only be able to claim a deduction for interest you pay on mortgage debt up to $500,000, down from $1 million today.

But since the bill doubles the standard deduction, only 4% of filers would still claim the mortgage interest deduction, down from 21% today, according to Tax Policy Center estimates.

Repeals the Alternative Minimum Tax: The AMT, originally intended to ensure the richest tax filers pay at least some tax by disallowing many tax breaks, but it most typically hits filers making between $200,000 and $1 million today.

Those who make more usually find they owe more tax under the regular income tax code, so end up having to pay that tab instead.

Repeals the estate tax: The estate tax today affects just 0.2% of all estates, and only those with more than $5.49 million in assets (or $10.98 million if you leave a spouse behind).

Nevertheless, Republicans are still pushing to repeal it. The House bill, however, would delay repeal until 2024, and in the meantime doubles the exemption levels.

Given that the White House and Republicans have been pushing tax reform as a boon to the middle class and given that the estate tax exemption levels already protect the vast majority of family farms and businesses from having to pay it, this provision may face a steep climb to the finish line.

FOR BUSINESSES

Lowers corporate tax rate: The bill would permanently cut the corporate rate to 20% from 35%.

Republicans argue that corporate tax cuts are good for the middle class because they will increase investment, jobs and wages. The White House even asserts that a corporate tax cut will result in at least a $4,000 boost in annual income for households.

But a lot of economists push back on the idea that the middle class will see a big raise soon, if at all.

Creates territorial tax system: U.S. companies owe U.S. tax on all their profits, regardless of where those profits are earned.

Many argue that this "worldwide" system puts American businesses at a disadvantage to foreign competitors. That's because those competitors come from countries with territorial tax systems, meaning they don't owe tax to their own governments on income they make offshore.

The House GOP bill would switch corporate taxation to a territorial system. That way, American companies would owe U.S. tax only on what they earn here. Their offshore profits would only be taxed by the country where the money is made.

Taxes existing overseas profits: The House bill would impose a one-time rate of 14% on existing foreign profits if they're being held offshore in cash. Foreign profits that are invested in noncash assets offshore would be taxed at 7%. Companies would have up to eight years to pay what they owe.

The measure would raise revenue from income that has so far escaped U.S. taxation. Under current law, companies pay U.S. tax only when they bring the money home. But it's also meant to entice companies to invest some of the foreign profits stateside.

Lowers tax rate on pass-throughs: Most U.S. businesses, large and small, are set up as pass-through businesses, not corporations. They're called pass-throughs because their profits are passed through to the owners, shareholders and partners, who pay tax on them through their personal returns.

The House bill would lower the top income tax rate on pass-throughs' profits to 25% from 39.6% today.

It would also offer a phased in lower rate of 9% for businesses that earn less than $75,000. That's below the 12% bottom bracket in the House bill and below today's 10% bracket.